U.S. EX REL. MOSSEY v. PAL-TECH

The opinion of the court was delivered by: Paul L. Friedman, District Judge.

MEMORANDUM OPINION

Thomas E. Mossey brought this suit against his former employer,
PaL-Tech, Inc., alleging that the company violated the False Claims Act,
31 U.S.C. § 3729 et seq., as amended, by submitting false claims for
payment to the United States (Count I), that the company's actions were
part of a conspiracy to defraud the government (Count II), and that the
company retaliated against him once it became aware of certain activities
related to his claims (Count III). At a hearing on October 27, 2000, and
in an Order issued that same day, the Court dismissed Counts II and III
of plaintiff's complaint. See Order of October 27, 2000. Count III,
however, was dismissed without prejudice based on counsel's
representation that it likely would be re-pled with additional facts if
plaintiff were permitted limited discovery on the issue. See id. at 2;
Transcript of Status Conference of November 20, 2000. In January 2001,
plaintiff filed an amended complaint that re-alleged claims of conspiracy
(Count II) and retaliation (Count III).

By Order of April 20, 2001, the Court dismissed Counts II and III of
plaintiff's amended complaint with prejudice and denied plaintiff's motion
for reconsideration of the Court's October 27, 2000 Order. Thus, all that
remains in this case is Count I of the amended complaint and defendant's
counterclaim, which the Court permitted to be filed by separate Order of
April 30, 2001.

The matter now comes before the Court on defendant's motions to dismiss
the remaining count of the amended complaint for lack of subject matter
jurisdiction and to strike plaintiff's expert report, as well as on
plaintiff's motion to dismiss defendant's counterclaim pursuant to Rule
12(b)(6) of the Federal Rules of Civil Procedure for failure to state a
claim on which relief can be granted. After careful consideration of the
motions, oppositions and replies, the Court will deny defendant's motion
to dismiss, grant defendant's motion to strike and deny plaintiff's
motion to dismiss the counterclaim.

For this Court to have subject matter jurisdiction over a qui tam
action, the complaint cannot be "`based upon' the public disclosure of
allegations or transactions" in a hearing or investigation or from the
news media or upon "allegations or transactions substantially similar to
those in the public domain." United States ex rel. Findley v. FPC-Boron
Employees' Club, 105 F.3d 675, 685 (D.C. Cir. 1997) (quoting
31 U.S.C. § 3730(e)(4)(A)). In enacting the qui tam statute, Congress
intended to prevent parasitic lawsuits while simultaneously "inducing
informers" to turn in violators. Id. at 680, 682. It therefore limited
the courts' jurisdiction to those actions where the plaintiff "has
contributed significant independent information" not previously
disclosed. Id. at 686. In deciding whether suit is barred by Section
3730(e)(4)(A), a court therefore must determine whether information in
the public domain, if any, "could have formed the basis for a government
decision on prosecution, or could at least have alerted law enforcement
authorities to the likelihood of wrongdoing." United States ex rel.
Joseph v. Cannon, 642 F.2d 1373, 1377 (D.C. Cir. 1981) (quoting Pettis
ex. rel. United States v. Morrison-Knudsen Co., 577 F.2d 668, 674 (9th
Cir. 1978)); see also United States ex rel. Springfield Terminal Ry. Co.
v. Quinn, 14 F.3d 645, 654 (D.C. Cir. 1994) (quoting language for same
proposition). If so, a plaintiff's qui tam action must be dismissed.

In this case, the only information that could be construed as "publicly
disclosed" prior to plaintiff's initiation of this lawsuit was a United
States Agency for International Development ("USAID") performance audit
of Jorge Scientific Corporation, a company that supplied support services
to USAID's Center for Population, Health and Nutrition ("PHNC") before
PaL-Tech did. Jorge was investigated by USAID's Office of Procurement for
allegedly performing work outside the scope of its contract. While the
USAID audit of Jorge may have been enough to form the basis for the
government to prosecute Jorge or to alert authorities of possible
wrongdoing by Jorge, the allegations made by plaintiff involve a separate
company allegedly filing separate and very different false claims against
the government. Even if the allegations regarding Jorge were well-known,
so far as the record before this Court shows there was nothing in the
public domain about wrongdoing by PaL-Tech before plaintiff brought suit.
Section 3730(e)(4)(A) therefore does not deprive this Court of
jurisdiction. See United States ex rel. Springfield Terminal Ry. Co. v.
Quinn, 14 F.3d at 654.*fn2

While the alleged fraudulent conduct by PaL-Tech may be similar to the
publicly disclosed fraudulent conduct by Jorge, suit would be barred only
if public disclosures about the earlier similar fraudulent conduct have
made the nature of the fraud and the actors responsible so "easily
identifiable" that the relator has provided no independent information of
any significance. See United States ex rel. Findley v. FPC-Boron
Employees' Club, 105 F.3d at 687-88 (public disclosures specifically
identified because Findley's complaint "merely echoes publicly
disclosed, allegedly fraudulent transactions" regarding illegal retention
of monies through vending machine service contracts with the federal
government and the employee organizations that provided the vending
services; government already had sufficient information to enable it to
adequately investigate the case and decide whether to prosecute). Compare
Cooper v. BlueCross & BlueShield of Florida, Inc., 19 F.3d 562, 566
(11th Cir. 1994) (report describing widespread fraud in general terms
without specifically identifying actors is insufficient to trigger the
jurisdictional bar).

The Court concludes that the fraud perpetrated on USAID's Center for
Population, Health and Nutrition has not been so widespread and notorious
that other independent contractors working for PHNC are easily
identifiable as perpetrators of fraud. See United States ex rel. Findley
v. FPC-Boron Employees' Club, 105 F.3d at 687. The USAID audit report on
Jorge found that the company "had not performed personal services for the
most part" and had performed work "within the scope of the contract."
Def. Motion to Dismiss at 4. Thus, the alleged fraud by Jorge appears not
to have been widespread or generic. Nor can PaL-Tech be easily identified
based on the Jorge audit report without the unreasonable presumption that
all support services contractors commit fraud. Cf. United States ex rel.
Schwedt v. Planning Research Corp., 39 F. Supp. 28, 32-33 (D.D.C. 1999)
(jurisdictional bar triggered where public disclosure of allegations or
transactions and qui tam action revealed same instances of fraud by same
company).

It appears to this Court that plaintiff has "contributed significant
independent information" not already in the public domain. Without
plaintiff's actions, it is extremely unlikely that the audit of Jorge
Scientific Corporation would have been sufficient to alert the government
to the alleged fraud by PaL-Tech. Barring this suit on the basis of the
audit of Jorge would be a frustration of the very purpose of the FCA at
best. The motion to dismiss for lack of subject matter jurisdiction
therefore is denied.

II. PLAINTIFF'S EXPERT WITNESS REPORT

Defendant also moves to strike plaintiff's expert witness report for
failure to meet the requirements of Rule 26(a)(2) of the Federal Rules of
Civil Procedure. In response, plaintiff asserts that its expert report
complies with Rule 26(a)(2) and that the testimony of its expert, Mr.
Leslie A. Leiper, will provide no legal opinions that would render the
testimony impermissible.*fn3 The Court is unconvinced by plaintiff's
arguments and therefore strikes
plaintiff's initial and supplemental Rule 26(a)(2) reports.

Plaintiff's expert report was not prepared in compliance with Rule
26(a)(2)(B) of the Federal Rules of Civil Procedure. First, there is no
indication of how much plaintiff is paying Mr. Leiper for his services.
Second, it is unclear whether Mr. Leiper has published any articles and,
if so, what they concern. Third, Mr. Leiper makes no mention of any
exhibits that he intends to use during his testimony. Lastly, Mr.
Leiper's very brief report fails to provide complete statements of his
opinions or the bases and reasons for them, nor does it adequately
identify "the data or information [he] considered" in forming his
opinions. Fed.R.Civ.P. 26(a)(2)(B). These deficiencies are most
troubling, especially given plaintiff's utter failure to rectify the
errors in his ...

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